Yesterday, the Superior Court of California, Santa Clara, noted a "voluntary dismissal" of the case. Kaleidescape CEO Cheena Srinivasan tells CE Pro that both parties have agreed not to comment at this time.

Court notices indicate that Kaleidescape requested a dismissal of the case on May 12 and that the next day a joint notice of settlement was filed. The court took three days to review the parties' stipulations and determined on May 19th, "Case complete."

The case ends a long and complicated test of the rights of both content creators and the studios who market that content … as well as the consumers who "own" copies of the content and the manufacturers who unlock it.

This may have concluded the "test" but there are no proven results. Since 2004, the movie industry has pushed to make Kaleidescape's offerings illegal. The fear of piracy has informed DVD CCA's every move. When the industry is concerned that a $4-10,000 item will be used mostly for infringement, it's drowning in its own paranoia. A big box store desktop computer with a $50 piece of software will do the same thing -- and that's if the would-pirates even bother to pay for the DVD-ripping program in the first place.

The industry wants to sell plastic discs but it doesn't want consumers to have much choice in how they use them after they've paid for them. Kaleidescape's jukeboxes would rip lossless DVDs and Blu-Rays directly to the internal drive and allow instant playback (including skipping the long stream of anti-piracy PSAs the studios still seem to feel obliged to insert into every paid-for movie) of the consumer's library.

Of course, it also bricked this latest offering by requiring the user to insert Blu-Ray discs before allowing "instant" playback (earlier in the legal battle, DVDs were also included in the requirement), thus removing a great deal of the convenience someone just paid over $4,000 for.

One of the sticking points for the CCA over the years was the anti-piracy DRM that comes standard on every DVD and Blu-Ray, but even Kaleidescape's lack of circumvention somehow posed a problem.

That group argues that the license that governs CSS – required of all manufacturers who make DVD players – expressly prohibits the manufacturers from allowing users to copy DVDs, even if they own those DVDs.

Kaleidescape has always maintained that the DVD CCA contracts express no such prohibitions. In any case, Kaleidescape servers make bit-for-bit copies so that the digital rights management (DRM) provisions of CSS are preserved.

Even with the DRM intact, the studios' presumption that Kaleidescape was manufacturing piracy boxes dragged the company into court and kept it there for ten years. What has just transpired doesn't really sound like a victory for the company. There may be more stipulations added to the legal framework surrounding Kaleidescape's jukeboxes that make them even more useless than they are currently. Or maybe future development is predicted on the company entering into contracts with the studios to push their lackluster digital offerings.

But whatever it is, it's hardly seems like a victory for the Right of First Sale. If the CCA's arguments are still being entertained, even owning a physical copy makes you (and Kaleidascape) subject to restrictive license agreements -- meaning it's highly unlikely bit-for-bit copying will ever be approved for those willing to shell out what Kaleidescape is asking for its equipment.

You feed it all your movies and music on disc: CDs, DVDs and Blu-ray discs. The Cinema One copies each disc to its 4-terabyte hard drive. 25 minutes for a DVD; two hours for a Blu-ray.

And I mean it copies everything. Every deleted scene, director’s commentary, alternate ending. Every DVD extra. And it doesn’t touch the video — there’s no compression or anything; it copies every pixel of quality that’s on the disc.

Once these movies are stored on the drive, you can call them up instantly using the remote or the iPad app.

When you hit Play on the remote, the movie begins playing instantly.

Read that again. The movie begins playing. Not the FBI warning, not the MPAA screen, not the previews, not the DVD menu — the movie itself. You cannot imagine how delightful that is compared with what we’re used to now: Downloading or streaming movies is handy, but you don’t get anything like the quality of Blu-ray, and you generally don’t get any of the bonus features. And discs give you the quality and the extras but require you to sit there staring at stupid FBI and MPAA screens that you’re not allowed to skip. The Kaleidescape box offers the best of both worlds.

This convenience of not being told you're a thief by your purchased product comes at a price. One is the retail price, which is an astounding $4,000. The other is a tax (of sorts) borne out of Hollywood's stupidity and paranoia.

When you want to play a Blu-ray movie off the Cinema One, you have to hunt down the original disc you own, insert it into the Cinema One’s slot, and wait for it to load. You’re not playing the disc; you’re just confirming that you own it.

But you’re also losing 80 percent of the value of having a Cinema One! What happened to “any movie in your collection, instantly”?

That's Hollywood crippling a device to ensure the $4,000 product never lives up to its potential. This is what happens when execs see nothing in the technology but a new way to pirate movies. Instead of a seamless, instant experience, you're back in the position of hunting for the purchased discs you already "conveniently" stored on the hard drive. For whatever reason, you don't have to do this with regular DVDs. (Presumably because that market isn't where the money is anymore, although at one time, that ridiculous stipluation was forced on Kaleidescape by Hollywood lawyers -- and that's when the box ran about $10,000.)

You can also purchase movies through Kaleidescape, but at this point, the selection is woefully limited. For only $2, you can purchase what amounts to a digital license to play your purchased Blu-rays without having to load the original disc, but even that is hampered by a lack of upstream licensing.

That’d be a reasonably priced solution if it were available for any Blu-ray movie you own. But it’s not. In fact, it’s available for relatively few movies: only those from Lionsgate and Warner Bros. Kaleidescape says it’s working on reaching similar deals with other movie companies, but for now, it’s only a fractional solution.

So, the studios are more than happy to cripple the device, but not so interested in providing affordable licensing of their productions. It's certainly had time to work these details out. It's been fighting Kaleidescape since 2004, tenanciously combating every technological advance the company made. Along the way, it forced the company to require the insertion of every disc before playing (including regular DVDs) and dragged it to court on multiple occasions to claim its "circumvention" of disc-based copyright protection was infringement (even if people were "burning" movies they owned to the drive).

Now, Hollywood has been forced to accept this device, nearly a decade since it first began its attack. The number of licensed movies available for download barely clears 2,000 titles. There may be more to come, but it seems unlikely to be fully embraced by the same studios who spent 10 years fighting it. And who's to say that any licenses obtained won't be rescinded in the future, punching holes in your digital collection and putting you back in the position of hunting down Blu-ray discs you stashed away after burning them to Kaleidescape's drive? It's not as though that sort of "you don't really own your digital purchases" bullshit has never occurred before.

As Pogue points out, the studios' tampering makes this product almost completely useless.

But that copy-protection business is going to kill a lot of potential sales. It’s like having a TiVo that can’t record anything on a timer, or hiring a tax preparer who hands you the blank 1040 form and a pen. It just defeats the purpose.

That's copyright protection for you. All the promise in the world negated by fearful Hollywood execs who see pirates hiding under every new technological advance.

from the why-do-we-let-this-happen? dept

As mentioned, it looks like Canada's new copyright law will include the "digital locks" provision, which is more accurately described as giving Hollywood a veto on any technology it doesn't like. If you haven't followed the specifics, the "digital locks" provision is an anti-circumvention rule that makes it against the law merely to break a "digital lock" (i.e., to route around any form of DRM, no matter how weak) even if (and this is the important part) you are breaking the digital lock for perfectly legal reasons. For reasons that I still cannot comprehend, Hollywood has insisted that anti-circumvention provisions -- even if there's no infringement -- are of utmost importance. If it was really about protecting against infringement, they would make it clear that the anti-circumvention provisions only apply in cases where copyright law is broken.

The real reason why they want anti-circumvention even when there's no copyright infringement is because it gives them a veto on any new technology. All they have to do is put in some sort of weak digital lock and suddenly the company has to "negotiate" a deal or they can be sued out of existence.

This is not theoretical. In fact, we now have yet another very real example of Hollywood's ability to kill a technology that only has legal uses thanks to the absolute nature of the DMCA's anti-circumvention clause (on which Canada's law was modeled). We've written about Kaleidescape a few times in the past. The company makes super high end DVD jukeboxes, that allow people to take the DVDs they own and store digital copies on a home (not internet-connected) server, to make it easier to watch those movies. The company has gone to amazing lengths to prevent its product from being used for infringement. Here, I'll let the company explain the details directly:

Kaleidescape has carefully designed its products to protect the rights of content owners. The hard-disk copy of each DVD retains all of the DVD CCA's scrambling and adds more encryption. The Kaleidescape System is a closed system that prevents DVDs from being copied to the Internet, to writable DVDs, or to computers or mobile devices. Furthermore, you cannot download a pirated movie from the Internet to a Kaleidescape System.

Every Kaleidescape customer must agree to copy only the DVDs that he rightfully owns, and must reaffirm this agreement upon copying each DVD. Kaleidescape Systems identify rental discs and prevent them from being imported. This combination of business practices and technology has been so effective that after years of searching for evidence that Kaleidescape's customers use their systems to steal content, the DVD CCA admitted in writing that Kaleidescape has done no harm to any of the motion picture studios, and was unable at trial to show any harm to the DVD CCA itself.

At one point, the company even went to such ridiculous extremes that it required users to put the DVD in the jukebox any time it wanted to play a movie from it -- effectively taking away the device's entire purpose, just to appease Hollywood.

And, none of it mattered. A court has issued an injunction against Kaleidescape selling these devices (pdf and embedded below). The specifics of the case revolve around questions of whether or not Kaleidescape breached the specific CSS license agreement that covers the DRM found on DVDs (which, again, Kaleidescape not only retains but enhances in its product). But that license agreement only has force because of the anti-circumvention provisions of the DMCA.

In other words this product, which can only be used for legal means -- and for which there has been no proof presented (ever) that it was used to infringe -- has been killed by a court... thanks to Hollywood's veto on this technology.

And the amazing thing is that all this does is make things worse for Hollywood. Considering how much Hollywood has been whining about DVD sales falling lately, a device like this only serves to make DVDs more valuable, meaning they would sell more.

Kaleidescape was founded in 2001 to bring consumers a fantastic experience for enjoying their movie collections. The Kaleidescape movie server makes digital copies of DVDs and Blu-ray Discs to hard disk drives so families can play back their movies instantly from any room of their home. A movie starts directly from the beginning, without forcing the family to endure advertisements, trailers, and confusing menus. With the company's wide-ranging innovations, customers can jump directly to the greatest scenes and songs in movies and concerts, and small children can start their movies all by themselves.

[....]

Over the years, Americans have amassed over 13 billion DVDs and Blu-ray Discs – about 110 per household. This means that many American families have a few thousand dollars tied up in a library of movies they hoped to enjoy over and over. However, with collections that size, families soon realize that it takes so long to find what they're looking for that it just isn't worth buying more discs. This frustration has led to a well-publicized 58% decline in revenues from the sale of DVDs since 2006.

The Kaleidescape System eliminates that frustration. Because it's so easy and fun for Kaleidescape customers to enjoy their movies, they start buying movies again, and with a bigger appetite. The average Kaleidescape family owns 506 movies on Blu-ray and DVD.

But thanks to digital locks and anti-circumvention rules, such a product got voted out of existence by the very industry it would help the most.

from the controlling-innovation dept

You may recall the legal fight over Kaleidescape. The company built a ridiculously expensive (tens of thousands of dollars) DVD jukebox that was clearly designed not for unauthorized file sharing, but for those with a huge disposable income to store their DVDs on the device so it was easier to watch or playback any DVD they owned (you couldn't transfer the movies off the device, so it was useless for further copying). Of course, as usually happens, Hollywood got upset, saying that this process of backing up your DVDs was illegal, using a twisted argument that the encryption on DVDs was broken by this system, and thus it's a violation of the DMCA. This is a massive problem with the DMCA's anti-circumvention clause, which says that even if the copy itself is legal, if it involves encryption, the process of making that (legal) copy, becomes illegal.

While Kaleidescape won in the lower court, the appeals court reversed, highlighting again how Hollywood (despite claims it would never use copyright law to block technology) uses the legal system to block technological innovation.

Kaleidescape has now come out with a new product that actually adds the ability to store Blu-ray discs as well -- which might be a surprise given last summer's ruling. However, in response to the ruling, Kaleidescape added one "feature" which it hopes will satisfy Hollywood lawyers: to play back a movie, you now have to put the original disc into the player. Yes, you read that right. This is a device designed to rip and store your DVDs -- and the only way you can play them back is to go ahead and put the actual DVD into the player to prove that you have it. In other words, it takes away the whole idea of the convenience behind the product.

And, guess what? Hollywood still isn't happy.

The AACS technology and licenses do not permit ripping of Blu-ray discs unless the copy has been authorized by the content owner, either by setting the Copy Control Information appropriately (and nearly all BD movies are set for “Copy Never”, just like DVDs), or by individual authorization through the Managed Copy process, which we anticipate rolling out at the end of this year or the beginning of 2011.

This is exactly what the law is not supposed to do. It's letting Hollywood set the terms of technological innovation, and blocking any concept of fair use or backup copies that are recognized as legal. It's giving Hollywood a veto on technology, and causing tech companies to jump through ridiculous hoops to disable obvious functionality, just because Hollywood doesn't like what it does.

from the *sigh* dept

Well, there goes that one. Just a few hours ago, we were writing about how Judge Patel's district court ruling barring Real Networks RealDVD system seemed to conflict with a California state court ruling for Kaleidescape. It's true that there were some differences in the details behind the ruling, but it might not matter either way, as a state appeals court has reversed the lower court ruling and has basically said that Kaleidescape's DVD backup system likely violates the DRM found on DVDs.

Once again, we're seeing a fearful Hollywood, unwilling to innovate itself, using the courts and the law to stomp out anyone who innovates. The Kaleidescape product is clearly not for "piracy" purposes. It's a server that costs around $10,000, and is designed for high-end movie fans, who want to store all of their legally purchased movies on a server so they can watch it. It didn't serve any sort of "piracy" purpose whatsoever. But, thanks to Hollywood freaking out over the fact that anyone might make a copy of a movie, even for perfectly legal backup purposes, that device may now be dead.

Time and time again, we hear folks in the entertainment industry insist that they want to support technological innovation, but their actions show otherwise. They tried (and failed) to outlaw the VCR. They tried (and failed) to outlaw the MP3 player. But lately they've been succeeding in outlawing products just because they don't like them. Doesn't that seem like a massive problem?